Problem
Weaver Chocolate Co. expects to earn $3.60 per share during the current year, its expected dividend payout ratio is 60%, its expected constant dividend growth rate (g) is 6.5%, and its common stock currently sells for $32.50 per share. New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred (F = 0.08).
Question 1: What would be the cost of retained earnings common equity (rs) for Weaver Chocolate Co.?
Question 2: What would be the cost of equity from new common stock (re)? Show your all work and calculations.